Tax changes for 2021/22

7th April 2021

The new tax year started on 6th April 2021. Find out about the tax changes for 2021/22, including personal allowances and thresholds, directors salaries, National Minimum Wage, company car allowances and more.

tax changes for 2021/22

Tax changes for 2021/22

The recent 2021 Budget outlined several tax changes for 2021/22 which are now in force. In this guide we’re covering:

  • Personal tax thresholds and allowances
  • Company car allowances (including fuel Benefit in Kind)
  • Increases to National Minimum Wage/National Living Wage and SSP
  • Optimum directors salary for 2021/22
  • Changes for businesses impacted by the pandemic

Personal tax thresholds and allowances

The employee personal allowance for 2021/22 is £12,571.

The tax rates and thresholds for 2021/22 for England and Northern Ireland are:

Tax band Threshold
Basic Rate Tax (20%) £12,571 – £50,270
Higher Rate Tax (40%) £50,271 – £150,000
Additional Rate (45%) Above £150,000

Please note Scottish and Welsh thresholds are slightly different, get in touch if you would like more information about rates in these countries.

New tax codes are available for 2021/22 on HMRC’s website.

Company car tax changes for 2021/22

New rules on company car tax came into force last year. The measures formed part of the government’s goal to end the sale of diesel and petrol vehicles by 2035.

Under the new rates, electric vehicles were charged at 0% tax last year, however for 2021/22 this has risen to 1%.

The tax applied to the list price other vehicles is increasing based on their CO2 emissions.

If an employer pays for fuel an employee uses for personal use it is classed as a Benefit in Kind (BiK). Tax paid on BiKs is being increased. For vans this is a fixed amount of £3,500, or £666 on fuel for a van provided for personal use.

For cars, if an employee who is provided with a company car also receives fuel from his employer, is taxed on the cash equivalent value of the BiK each tax year. This is a fixed amount increasing to £24,600 for 2021/22.

National Minimum Wage & Statutory Sick Pay

The National Minimum Wage (National Living Wage) has increased to £8.91, while the age at which you are eligible for the full amount has reduced from 25 to 23 years old.

Statutory Sick Pay (SSP) has increased by 50p to £95.85 per week, for up to 28 weeks.

SMEs in the UK will continue to be able to reclaim up to two weeks of eligible SSP per employee from the government.

Directors salaries

If you are a company director or shareholder the optimum salary for 2021/22 is £8,840, with dividends of up to £41,430.

Assuming you have no other income, this allows you to use your personal allowance at the Basic Rate of 20%, resulting in a tax bill of £2,677.50 and take home salary of £47,592.50.

What about covid?

The 2021 Budget included several measures for business impacted by covid which are currently in force. These include:

  • 100% business rates relief for eligible retail, hospitality and leisure businesses
  • Extensions to the furlough and SEISS schemes
  • A new Recovery Loan Scheme which will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million
  • New restart grants for businesses which have had to close during lockdown:
    • £6,000 grant available per premises to non-essential outlets due to open in April
    • £18,000 grant available to hospitality and leisure businesses (including gyms and personal care services)

You can read more about what the Budget said about covid in our guide.

Other tax changes for 2021/22

Other things changing include:

  • The introduction of the new “super deduction” tax cut from 1 April 2021. Businesses investing in new plant and machinery assets from 1 April 2021 until 31 March 2023 can cut their tax bill by up to 25p for every £1 they invest
  • Student loan earning thresholds have been increased to £19,895 for Plan 1 loans and £27,295 for Plan 2 loans

Talk to the experts

Our Tyne & Wear tax experts are on hand to offer further support if you have any questions about what the tax changes for 2021/22 mean for your business. Give us a call on  0191 567 0304 or email to talk to our friendly team.

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
to Accounts and VAT.